"New Real Estate Agent Rule: Will Buyers and Sellers Notice Impact?"

A new rule for real estate agents has recently been implemented, raising questions about its effects on buyers and sellers. The rule is designed to alter industry practices, and there is speculation about how it might influence real estate transactions and market conditions. The impact on both parties involved in buying and selling properties remains to be seen.

Starting Saturday, new rules for the residential real estate market will introduce unfamiliar procedures for those buying or selling homes, potentially causing some confusion.

These changes are a result of a 2023 legal decision regarding real estate agent compensation.

Previously, when a home was sold, a 5% to 6% commission was paid by the seller and split between the buyer’s and seller’s agents. This system was alleged to keep commissions higher and required the seller to pay the buyer’s agent, which many considered unfair.

Stephen Brobeck, a senior fellow with the Consumer Federation of America, has long advocated for changes to realtor commissions. He argues that it is unfair for sellers to cover both the listing and buyer’s agent fees.

Under the new rules, sellers will decide if and how much to pay a buyer’s broker. This compensation information cannot be listed in the multiple listing service (MLS), but can be communicated through personal contact or informal methods like social media or lawn signs.

Buyers will now need to sign an agreement with their broker before viewing homes, detailing the compensation expected from them. This agreement must be specific and not open-ended.

National Association of Realtors President Kevin Sears believes that discussing the value of broker services and their compensation is beneficial for consumers, especially given the scale of real estate transactions.

The National Association of Realtors, a major Washington lobby with over 1.5 million members, supports this shift towards more consumer education and negotiation.

Although the new practices may be familiar to some due to existing broker agreements and alternative brokerage models, there is uncertainty about how these changes will play out. For instance, buyers may face challenges if they can’t afford the broker’s fee or if sellers are willing to compensate the buyer’s broker.

Some agents worry that these rules, intended to increase transparency, are causing more confusion. For example, buyers’ agents now need to contact each listing to determine commission details.

In Austin, where the market fluctuated sharply, Aaron Farmer of Texas Discount Realty expects sellers may offer compensation to buyer’s brokers as an incentive, but this may vary by region. He also anticipates that fewer agents could lead to lower commission rates and higher transaction volumes.

Andi DeFelice, owner of Exclusive Buyer’s Realty in Savannah, Georgia, believes first-time buyers may be most affected by these changes, potentially struggling to afford commission fees and lacking proper representation.

DeFelice is optimistic that the industry will adapt quickly but acknowledges the possibility of significant changes in the future. Brobeck also anticipates substantial shifts within five years as the industry adjusts.

Farmer concurs, noting that some agents may leave the industry due to the changes, which could ultimately benefit those who remain by reducing commission rates and increasing transaction volumes.

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Source: usatoday‍